The Financial Conduct Authority, in its new business plan, has revealed
its intention to investigate the vehicle finance market. It will look at
current methods of funding and the administration. The FCA expressed the
view there may be a lack of transparency as well as potential conflicts
of interest. But it was its third point which triggered warning bells
with lenders, namely the FCA's view that there may be irresponsible
lending in the motor finance industry.

We all know where 'irresponsible lending' ends up, payment protection insurance and the like.

The FCA will "conduct an exploratory piece of work to identify who uses
these products and assess the sales processes, whether the products
cause harm and the due diligence that firms undertake before providing
motor finance."

Following this review the regulator will assess whether and how to
intervene in the market. You have not heard the last of this.

WHY LEASING CARS IS GOOD FOR THE COUNTRY

Air quality is a matter of life and death. It is estimated that in the
UK, poor air quality is responsible or contributes to the early deaths
of 40,000 people each year. Lease cars now account for an ever
increasing share of all new car registrations. Drivers have seen an
affordable, easy way of financing a new car every few years with the
result that the leased car fleet in total has lower CO2 emissions and a
higher than average uptake of electric vehicles.

The average car on the UK car fleet of 30 million cars is eight years
old. As a group they emit significantly more CO2 than the average leased
car. Leasing cars saves lives.

VOLVO SHOWS THE WAY

Volvo Cars have announced that all the models it introduces from 2019
will be either hybrids or powered solely by batteries. It is the first
mainstream car manufacturer to question the future of the internal
combustion engine.

Volvo's decision is the boldest move by major car company to commit
themselves to technologies which represent only a small share of the
total vehicle market. Combating urban pollution is increasingly viewed
as essential and Volvo have acknowledged the fact.

While most major manufacturers can offer hybrids and battery-powered
options, no one has been willing to give up cars powered solely by
petrol or diesel. Volvo's move is a brave indicator and a sign that a
new era is on the horizon. In the United States, Tesla, which has made
only limited numbers of electric cars, amazingly surpassed Ford and
General Motors this year in terms of stock market value. It may be an
indication of where investors think the industry is headed.

How big a risk Volvo has taken remains to be seen. The company evidently
feels a much bigger risk would be to stick with internal combustion
engines. It is also worth remembering that Volvo is owned by Geely
Automobile Holdings of China, which already produces battery-powered
cars for the Chinese market. It could give Volvo a head start , The
decision by Volvo to focus on electric vehicles could ultimately give it
and Geely a head start. Volvo's battery-powered vehicles will be
produced initially in China, but eventually also in Europe and at a new
factory currently under construction in the United States.

Cars that run solely on battery power are still rare in most
countries because of high purchase prices, lengthy charging times and
limited ranges. However, the
advance of the self-driving car will also encourage a shift to battery
power because it is simpler to link self-driving software to an electric
motor than to a conventional engine.

Although no other traditional car manufacturers have declared their
intention to follow Volvo and Tesla, virtually all of them are investing
in hybrid and battery technology. We shall see.

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